Bay Area job losses likely in Citigroup layoffs

Also, company has S.F. office space that it could unload in its huge downsizing plan

Chronicle Staff and News Services

Published
4:00 am PST, Tuesday, November 18, 2008

A cable car rolls past a Citibank branch office in San Francisco's financial district Monday, Nov. 17, 2008. Citigroup has announced it will cut 53,000 jobs from its massive payroll as it tries to slash costs, shed its riskier businesses and clear the debris of the housing bust. (AP Photo/Ben Margot) less

A cable car rolls past a Citibank branch office in San Francisco's financial district Monday, Nov. 17, 2008. Citigroup has announced it will cut 53,000 jobs from its massive payroll as it tries to slash costs, ... more

Photo: Ben Margot, AP

Photo: Ben Margot, AP

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A cable car rolls past a Citibank branch office in San Francisco's financial district Monday, Nov. 17, 2008. Citigroup has announced it will cut 53,000 jobs from its massive payroll as it tries to slash costs, shed its riskier businesses and clear the debris of the housing bust. (AP Photo/Ben Margot) less

A cable car rolls past a Citibank branch office in San Francisco's financial district Monday, Nov. 17, 2008. Citigroup has announced it will cut 53,000 jobs from its massive payroll as it tries to slash costs, ... more

Photo: Ben Margot, AP

Bay Area job losses likely in Citigroup layoffs

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Financial giant Citigroup Inc. announced plans Monday to cut more than 50,000 jobs - a tidal wave of layoffs that will probably reach the Bay Area, where it is the third-largest retail bank.

The reductions, which will leave Citi about 20 percent smaller, are the latest step in a stunning remaking of the American banking landscape since the financial meltdown, an upheaval that has included the demise of storied investment houses and the conversion of others into commercial banks.

Citigroup, which received a $25 billion government investment through the financial rescue package, is widely seen as the sickest Wall Street bank.

Challenger, Gray & Christmas Inc., which has tracked downsizing since 1993, said Citi's 53,000 planned job cuts are the second largest on record. IBM announced in July it was cutting 60,000 workers. At its peak in 2007, Citi had 375,000 employees.

About half the cuts are expected to come from selling off parts of the business. The bank has said it will sell Citi Global Services and its German retail banking businesses, and it plans to unload more, a spokesman said. The other cuts are expected to come from layoffs and attrition.

Citigroup occupies about 200,000 square feet of office space at 1 Sansome St. in San Francisco, brokerage firm NAI BT Commercial said in an October report highlighting local companies that may unload space after the contractions and consolidation in the financial services sector.

The space accommodates about 1,000 employees, based on industry standards. If the 20 percent cut holds in San Francisco, that would mean 200 lost jobs and could mean additional sublease space coming onto an already weakening office market.

It's unclear, however, exactly how many people the company employs around the region, and Citigroup didn't respond to an inquiry from The Chronicle. The company's retail subsidiary, Citibank, operated 88 branches with more than $19.5 billion in deposits across the region, as of June, according to the Federal Deposit Insurance Corp.

That makes it the third biggest bank - after Bank of America and Wells Fargo & Co. - in the statistical area defined as Alameda, Contra Costa, Marin, San Francisco and San Mateo counties, with 10.8 percent market share.

In New York, Vikram Pandit, Citi's chief executive officer, met with employees Monday and laid out the bank's strategy in stark terms: "We are a bank. What does a bank do? A bank takes deposits and puts them to work by investing and making loans."

That simple, lean plan is a noticeable change from earlier in the decade, when banks were making a huge chunk of their profits from complex structured-finance products based on risky debt, such as subprime mortgages.

Now those revenues have all but dried up, and Citi is trying to extract itself from exotic debt instruments.

Citigroup, which built up through rapid acquisitions over the past two decades, has long been criticized as too sprawling and difficult to manage.

"Why the heck do they need 350,000 people to start with?" said Robert Howell, a finance professor at Dartmouth's Tuck School of Business. "It's always been way overstaffed. They should've woken up to that fact a year ago when they had way too many people to begin with."

Former CEO Charles Prince was shown the door last November after Citi suffered big mortgage losses. He was replaced by Pandit, a former Morgan Stanley investment banker well-respected as a banker, but who had never led a public company. Nevertheless, most industry analysts have said Pandit's approach - to sell off assets and cut costs - has been sound.

Of the big four U.S. banks, the others are JPMorgan Chase & Co., Bank of America and Wells Fargo & Co., Citi is the only one that has not made a recent major acquisition - which analysts say is one of the few chances for growth right now. Citi is also the only big bank left that has posted four straight quarterly losses.